Don't forget nursing home expenses or the fag end of life medical care. It's frikking expensive and eyewateringly big.
On 16 Sep 2016, at 11:37, Deepak Shenoy <[email protected]> wrote: >> >> >> >> Hypothetically, say that translates into 25K + 5K + 5K + 5K= 40K per month. >> Need to have a corpus that gives you this monthly amount with even >> conservative investments such as FDs. We're talking about a 8-10% ROI per >> annum. So, in this example, you need to have a corpus of 50 - 55 lakhs. If >> you have a good financial planner and a higher risk appetite, your returns >> can be higher. Hope this helps. > You will need a lot more. So I have this post: how much FY money do you > need? > http://capitalmind.in/2014/09/how-much-is-enough-to-say-fy/ > > and then I have this thingy: > http://capitalmind.in/2016/08/saving-retirement-much-enough/ > > What you need is a lot more because > a) inflation is much bigger than 5K > b) you need to plan to live to age 90. Just because. > > Now I assume you're the only person in your household with revenue, so you > may have to plan cash flow for say 50 years. > > You need money that gets you this 8% return and yet, lasts you all the way > for 50 years. How much do you need? > > The Answer is about Rs. 1.22 crores. (Assumptions: you get 8% on your > money, you spend 40K a month now, inflation is 5% a year). > > The way it works is > > Year 1 you have 1.22 cr. on which you make, at 8%, about 9.75 lakh, or > which you spend 4.8 lakh, and the rest stays in your capital which goes up > to 1.27 cr. > Year 2 you have 1.27 cr. on which you make, 10.16 lakh, you spend 5.04 lakh > (remember, 6% inflation) and your capital goes up to 1.32 cr > and so on > > your capital keeps going up for 35 years, till you have about 3.2 cr. and > in the last 15 years, it will plummet to zero (in the 50th year from now) > This capital also acts as an emergency buffer. > > I know there are variables, so you can calculate different ways to get > there - perhaps you sell your house when your daughter's 18 and then move > to a smaller place. Maybe you reverse mortgage the house when you're 60 to > get some money from a bank. Etc. I had a calculator on how much you need, > it's at http://capitalmind.in/2006/10/how-much-do-you-need-in-order-to/. > > Now, here's the other thing. If you're planning to build cash flow, don't > use FDs. They create taxable income and at large corpuses become very > unwieldy. THere are other instruments - I can give you more details if you > want to explore. These will both save you tax and perhaps create a "kicker" > income if rates continue to fall (a key risk here - imagine the person who > did this calculation in 1980 in the US - interest rates of 12% - and today > the FD rates are like 0.5%) > > Don't worry if you don't have this kind of money right now - there are > not-so-difficult ways to get there if you plan it a little more. You don't > want a precise plan - you need lots of buffers - but you need an idea that > this takes me to age 90. The big thing I would imagine you haven't > considered is that your child will need a lot more money as she grows up > and that you will need a lot more money for travel which I'm thinking is a > good part of your bucket list.
